Monday, April 14, 2014

CIB Approves $160 Million Gift To Billionaire Herb Simon's Pacers The Same Day It Formally Presents Proposal

The public has yet to receive a copy of the formal agreement between the Capital Improvement Board of Managers and the Indiana Pacers that calls for the municipal corporation to provide direct subsidies totaling $160 million to the NBA franchise over the next 10 years. Mayor Greg Ballard, CIB President Ann Lathrop and Pacers Sports & Entertainment CEO Jim "Rent-A-Civic Leader" Morris met with reporters for the first time to publicly discuss the proposal this morning after details of the 10-year deal were leaked to the media late Friday afternoon. Yet the CIB voted unanimously at its regular meeting this afternoon to approve the $160 million deal that had not been discussed at any of its prior meetings. Suffice it to say that per standard operating procedure, the CIB has engaged in discussions with its board members prior to this afternoon's meeting in violation of Indiana's Open Door Law for the past several months, unless we are to assume that board members required only a brief few minutes to review and vote on the critical, costly agreement.

The Indiana Pacers' organization has managed Banker's Life Fieldhouse, which was built by taxpayers at a cost of $183 million, since its opening in 1999 under an initial 20-year lease agreement with the CIB. Under the terms of the initial 20-year agreement, the Pacers were required to pay the maintenance and operating expenses on the arena; however, the NBA team received rent-free use of the Fieldhouse and got to retain all game and non-game revenues generated from its operations, in addition to the naming and advertising rights within the facility. In reality, the CIB from the very beginning quietly covered all major operating and maintenance expenses on the Fieldhouse during the first 10 years in direct contravention of its original lease agreement, costs that totaled in the millions of dollars. The Pacers also have exclusive control over 1,400 covered parking spaces owned by the CIB for their exclusive profit-making potential.

Starting in 2010, the CIB agreed to pay $33.5 million to the Pacers over a 3-year period, which was extended an additional year in the amount of at least $10 million before this latest 10-year, $160 million agreement was formally announced today. It includes $26.5 million to spruce up the locker rooms, concessions and LED boards that the Pacers use to sell advertising for additional revenues, plus another $7 million to replace carpeting and make other improvements over the next 10 years. The CIB will pay a $7.1 million management fee to the Pacers annually, plus another $3.7 million annually to cover utilities, security, insurance and other costs. The CIB is going to pay about $8 million to license the digital scoreboard purchased by the Pacers for about $16 million in 2012 and take ownership of it at the end of the 10-year term; however, the Pacers get to keep all advertising revenues generated from the scoreboard. By the end of the 10-year term, the digital scoreboard will no doubt be obsolete and require replacement just like the original scoreboard so we're essentially getting ownership of an asset that will have no value.

Mayor Greg Ballard's defense of the sweetheart deal is based on the argument that the Pacers have been operating the publicly-owned Fieldhouse on their dime since it opened, leaving out the fact that they get to use it exclusively for the profit-making purposes of their business endeavor, pay no rent to use it and pay no property taxes to support the burden it imposes on public safety and downtown infrastructure. Ballard also argues that the revenues raised by the CIB can only be used to support the sports facilities and the convention center.  "Funding for this agreement cannot by law be used for other things like police or potholes," Ballard said. "It's money generated from downtown visitors and ticket holders solely to support downtown sports and the convention center."

Like almost everything that comes out of Mayor Ballard's mouth, it's a lie to claim that only downtown visitors and ticket holders pay to support the sports facilities and convention center. Anyone who buys prepared food and beverages at any retail establishment in Marion County is paying to support the CIB. Anyone who ever rents an automobile is paying to support the CIB. Anyone who pays to put family members up at a hotel, or businesses who pay to put their employees up at local hotels, are paying to support the CIB. Anyone who pays for cable TV services pays a franchise fee every month to support the CIB. Anyone who purchases tickets for admissions to concerts or sporting events in this county are paying to support the CIB. All state taxpayers are paying several million dollars annually in state tax revenues to subsidize the CIB. It is a total myth that these facilities are primarily supported by out-of-town visitors and ticket holders. The majority of the revenues collected by the CIB are derived from taxes paid by local residents and state taxpayers. That's a fact.

The Pacers' Jim "Rent-A-Civic Leader" Morris insists without substantiation that the Pacers have lost more than $150 million since the team moved into Banker's Life Fieldhouse in 1999. The argument for paying what amounts to $16 million a year to the Pacers to operate our public arena is based on the argument that it reflects the actual costs they incur for managing and operating the Fieldhouse. Those figures have never been made public, although we're told now that under this new agreement that has yet to be made public before being voted on by the CIB today that a separate entity is being set up by the Pacers to track those costs. Whatever numbers are provided by that entity, I suspect they won't be based on audited financial statements and will likely be well-padded with other expenses unrelated to the actual maintenance and operating expenses for the Fieldhouse.

For purposes of comparison, Kansas City built its Sprint Center for $276 million, which opened in 2007. It is comparable in size to Banker's Life Fieldhouse. It seats 18,972 for basketball games versus the Fieldhouse, which seats 18,165. In inflation-adjusted dollars, the Sprint Arena cost very close to what the Fieldhouse cost ($259 million in 2014 dollars); however, Kansas City entered into a 35-year public-private partnership agreement with AEG to manage the arena. AEG contributed about $53 million towards the original construction costs in exchange for a revenue sharing agreement. The big difference is that the Sprint Center has no NBA team as its principal tenant. It relies exclusively on concerts and other paid events to cover its costs. Under its revenue sharing agreement, AEG has shared $9.3 million in additional revenues with Kansas City since it opened, which the city can put to use for other purposes. A hotel and auto rental tax pays for the debt service on the outstanding bonds issued to pay the arena's original construction costs. If AEG can spin off $9.3 million to Kansas City, you can only imagine the tens of millions of dollars the company is making under its management agreement.

So we're essentially paying Herb Simon $16 million a year to manage our Fieldhouse and letting him keep all the revenues, while Kansas City is being paid by AEG for the benefit of managing its Sprint Center. Yeah, it doesn't take a rocket scientist to figure out that Herb Simon is taking Indianapolis taxpayers to the cleaners. Like I said before, Herb must be laughing his butt off all the way to the bank at how easy it is to roll Hoosier rubes. I'm sure old Jim Morris will wind up making more money off this heist than he did from his multi-million dollar payoff from the original sale of former Indianapolis Water Company to NiSource before it was sold back to the City of Indianapolis and then sold to Citizens Energy, each time costing hundreds of millions more for Indianapolis ratepayers.

UPDATE: The CIB has posted a copy of the new lease agreement with the Pacers after the fact. I don't know why the CIB bothers paying for legal counsel since it's obvious these agreements are written 100% by and for the benefit of the billionaire sports team owners.

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Gov. Pence performing more marketing work for the Pacers in Germany


Anonymous said...

The Torah states though shall not promote their name and agenda...In lights and stars and more...

Flogger said...

You stated - "unless we are to assume that board members required only a brief few minutes to review and vote on the critical, costly agreement."

I have always thought the CIB Board Members were selected for their genetic Crony-Capitalism DNA. Thus, no thought is required. The Board votes with the interests of the Billionaires upper most in their minds. If any time at all is spent it is on crafting the fable of how much the City would lose if the Pacers left town.

Anonymous said...

and another public safety tax looms

Anonymous said...

Fables, of course Flogger is right. It is indeed a fable that the city would lose money if the Pacers left town. Absent the Pacers presence we could use BLF and the city would retain the monies earned. Why we might even pay off the bonds on one of those imperial palaces.